Herbalife punished 600 distributors for medical claims: ABC News

April 23, 2014|Reuters

(Robert Galbraith Reuters, )

WASHINGTON (Reuters) - Herbalife, a weight loss and nutrition company being investigated for allegations of running a pyramid scheme, disciplined hundreds of distributors last year for making unsubstantiated medical claims about its products, ABC News reported on Wednesday.

The network said the company disclosed the internal figures after an ABC News investigation found what it called "numerous examples of distributors boasting to potential customers that the company's products helped treat maladies ranging from diabetes to heart disease."

In one case, an ABC reporter posing as a customer caught a Staten Island, New York, distributor on a hidden camera saying a woman overcame a brain tumor after using Herbalife products, the network said.

Asked by ABC in a televised report if Herbalife cured brain tumors, Herbalife President Des Walsh said: "Absolutely not. Frankly, I am appalled to hear you say this because what is happening there is a complete and absolute violation of our rules."

Asked if such incidents happened often, Walsh replied: "I do not believe so."

"These instances ... are absolute aberrations... This is not the Herbalife I know," he told the network.

ABC said that since the interview, Herbalife had told the network it disciplined almost 600 distributors last year for making such claims and stripped 12 of their distributorships.

A company spokesman said in a statement to Reuters that as noted in the ABC News report Herbalife "is explicit with its members that products are not intended to diagnose, treat, prevent or cure any disease or medical condition, and under no circumstances should there be any statements, advertising or implications to the contrary."

"Enforcement of the rules of conduct is a top priority at Herbalife," the statement added. "We have a compliance team of over 300 people worldwide that monitors members' activity and enforces Herbalife's rules."

Several civil rights groups say that Herbalife is a pyramid scheme, which is a company that makes more money from signing up recruits than from selling products or services to customers.

The company denies the allegations. High-profile investors such as Carl Icahn, George Soros and Daniel Loeb have supported Herbalife in the past by taking stakes.

The Federal Trade Commission, the FBI, New York State Attorney General Eric Schneiderman and Illinois Attorney General Lisa Madigan have all started investigations into Herbalife.

Hedge fund manager William Ackman was the first to call Herbalife a fraud. He placed a $1 billion bet against the company in 2012.